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Designing Success With a Chain Concept

“Designing Success With a Chain Concept”

Jim and Michele Evanger pioneer franchising in interior design.

Michele Evanger purchased Designs of the Interior (DOTI) in 1993. Four years later, the Barrington, Ill.-based interior-design firm had evolved into three separate locations in the northern Chicago suburbs — but that wasn’t enough. Michele and her husband, Jim, sought higher growth than what additional company-owned studios would generate. The Evangers turned to franchising, a tried-and-true concept that remained untested in the high-end design business.

Fine-Tuning a Prototype

First, the Evangers tackled legal aspects. Thirty-three states have no particular franchise restrictions, but Illinois is among those that do — and one of the most difficult. "We had to climb the highest mountain first," says Jim. Developing and winning approval for their franchise concept took nearly eight months and required the help of a franchise attorney and consultant.

Their prototype required procedures that were specific enough to ensure quality and consistency, yet flexible enough to accommodate an industry where creativity is crucial. "There are a lot of things you can’t boilerplate," points out Jim. For example, whereas McDonald’s franchisees are required to use certain suppliers, DOTI doesn’t dictate vendors. The rationale: Tastes in Wisconsin differ considerably from Florida, and a designer often needs unique merchandise to please clients.

Though DOTI doesn’t restrict vendors, the Evangers worked hard to establish relationships with suppliers to secure lower prices and free samples for its franchisees.

The Evangers finally got some 50 manufacturers to offer deeper discounts (60% to 70% better than independent designers could get on their own), along with free samples.

Lowering the Barriers

Knowing that their target audience of prospective franchisees had little to invest, the Evangers structured fees to be lower than other industries. A DOTI franchise requires a one-time fee of $15,000 and 6% of annual gross sales as royalties. In contrast, most upfront fees are much higher, with royalties averaging 5% to 15%. "We anticipate over time we will raise those numbers," says Jim. "But we’re in a penetration mode right now."

Training was another area the Evangers had to fine-tune. DOTI asks franchisees to research local demographics before coming to training school. Then DOTI helps franchisees customize their business plan based on market needs and preferences.

Full Steam Ahead

The Evangers rolled out DOTI Franchising Inc. in mid-1998 and had four franchises running in 1999. Twenty-five locations are projected by the end of this year, with 100 expected by 2005. Combined company-owned and franchise revenues could reach $50 million within the next five years and generate $5 million to $8 million in net income. In the first year of franchising, DOTI sales tripled from $1 million for company-owned stores to $3 million for combined units.

Another benefit of franchising is being able to offer current employees greater growth opportunities. Being able to convert employees into franchise owners also keeps them from becoming the competition.

Writer: TJ Becker